Round and round she goes, but where NFIP ends up, nobody knows p2

Seconds after we published our last post, the U.S. Senate passed the bill that included both the Homeowner Flood Insurance Availability Act and the National Association of Registered Agents and Brokers Reform Act. The flood insurance act will keep flood insurance subsidies in place for four years. During that time, the Federal Emergency Management Agency — the agency responsible for the National Flood Insurance Program — will complete an affordability study and perfect new flood maps.

Critics of the Biggert-Waters Flood Insurance Reform Act had complained that the rate hikes and new flood maps were put into place before the safeguards included in the law could take effect. The maps, for example, extended the boundaries of high-risk flood zones to encompass homes that had been in low- or no-risk zones. Homeowners or homebuyers in those areas were then blindsided by the need for coverage and the higher cost of coverage. The bill passed this week will maintain low rates for those properties.

The White House is not a fan of the bill. Whether a veto is on the horizon is not entirely clear, but the administration has concerns with both the flood and the NARAB bills. The statement did not come from the president but from the Office of Management and Budget.

OMB would have preferred that a Biggert-Waters fix had focused more on offering relief to “economically distressed policyholders.” By delaying the premium hikes, the bill that passed will only add to NFIP’s $24 billion deficit — and the whole point of Biggert-Waters was to rid the program of its deficit and reconfigure its rating structure in order to make the program self-sustaining. In essence, the administration accuses this bill of throwing the baby out with the flood waters.

We will discuss NARAB and the administration’s objections to that bill — as well as any new developments with NFIP — next week.